w w w . L a w y e r S e r v i c e s . i n


Garments India Exports and Another v/s Dhanalakshmi Bank Limited and Another

    I.N. (Srfaesi) No. 194 of 2006
    Decided On, 27 March 2007
    At, Debt Recovery Appellate Tribunal At Chennai
    By, K. GNANAPRAKASAM (CHAIRPERSON)
    P. N. Radhakrishnan, M. Deepa, K. Rajasekaran


Judgment Text

The Judgment was delivered by : K. GNANAPRAKASAM (CHAIRPERSON)

As against the measures taken under Sec. 13 (4) of the , the appellant has filed S.A.-34/2005 before the D.R.T., Ernakulam, and the same came to be dismissed by its order dated 17th April, 2006. Aggrieved by the same, this appeal has been filed.

2. Though the appellants have raised several grounds, they have restricted their arguments to the issue whether the respondent has not complied with the statutory provisions as required under Rule 8 (2) of the Security Interest (Enforcement) Rules, 2002. Now let us consider the same. Rule 8 (2) of the Security Interest (Enforcement) Rules, mandates that, "The possession notice as referred to in sub-rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality, by the authorised officer." It is pointed out that the Rules does not stop with publication in newspapers alone but it qualifies that one must be in vernacular language having sufficient circulation in the locality. It is, therefore, contended that the publication of the possession notice as required under sub-rule (2) of Rule 8 is not directory, but it is mandatory. Admittedly, the respondent bank has not chosen to publish the possession notice as required under this rule and, therefore, the entire proceedings taken by the respondent bank are vitiated and liable to be set aside.

3. The respondents relied upon the application of Rule 1 of Order VIII of and sub-rule (2) of Rule 8 and they are not only inappropriate, but they do not also sound proper. First of all, one has to look into the provisions set forth in the Act or the Rules, which comes for adjudication. Sub-rule (2) of Rule 8 clearly states that the possession notice as referred to in sub-rule (1) shall also be published in two leading newspapers. The word employed is 'shall' and as such, there is no room to say that the option is on the secured creditor to take or not to take the publication in two leading newspapers. It does not stop with that and it proceeds further and states that out of two publications, one must be in vernacular in the locality. These are all the safeguards provided under the rule, not only to the purchasers, but also to the borrowers. Those provisions are intended to alert the public, that the property is under the possession of the secured creditor and it is in the nature of an indirect attachment as it has been spelt by the Hon'ble Supreme Court also, in Transcore case, (2006) 5 C.T.C. 753.

4. The ruling in Kailash case relied upon by the D.R.T. is good as far as extension of time that could be granted for filing of written statement by the defendants. The time limit prescribed under Rule 1, Order VIII of is only a procedural law and there is no quarrel as far as that aspect is concerned. The reason behind is that the time limit prescribed under any procedure law could be extended to meet the ends of justice. But if the time limit is prescribed under the Law of Limitation, 1963, no Court on earth, can enlarge the time and that is the difference between the time limit prescribed under the Acts and Rules and the time limit prescribed under the . Time limit prescribed under Rule 1, Order VIII of is only a procedural law and, therefore, in that context it was held that the time limit could be extended as it falls within the domain of procedural law and, therefore, it was held as directory and not mandatory.

5. On the contrary, the learned advocate for the respondent bank would contend that the non-publication of the notice as required under sub-rule (2) of Rule 8 of the Rules, is not at all a serious violation or breach. The learned advocate for the respondent referred and relied upon Rule 1 of Order VIII of and sub-rule (2) of Rule 1 of Order VIII of provides thirty days' time for filing of the written statement from the date of service of summons. Proviso to the said rule states. "Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the same on such other day, as may be specified by the Court, for reasons to be recorded in writing, but which shall not be later than ninety days from the date of service of summons." This Tribunal put a question to itself whether the time limit of 90 days as prescribed by the proviso to Rule 1, Order VIII of is mandatory or directory in nature. The Hon'ble Supreme Court in Kailashv. Nanhku, (2005) 4 S.C.C. 480 : 2005 (2) K.L.T 623 (S.C.) has held. "The purpose of providing the time schedule for filing the written statement under Order VIII, Rule 1 of is to expedite and not to scuttle the hearing. The provision spells out a disability on the defendant. It does not impose an embargo on the power of the Court to extend the time. Though the language of the proviso to Rule 1 of Order VIII of the is couched in negative form, it does not specify any penal consequences flowing from the non-compliance. The provision being in the domain of the procedural law, it has to be held directory and not mandatory." It was also observed, "28. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the statute, the provision of or any other procedural enactment ought not to be construed in a manner which would leave the Court helpless to meet extraordinary situations in the end of justice." The D.R.T. also took a view that the said sub-rules (1) and (2) of Rule 8 are intended to protect the third parties purchasers of the secured immovable assets taken possession of by secured creditor in exercise of the powers under Sec. 13 (4) of the Act, and it is not to the benefit of the borrower/debtor. As such, the non-compliance of sub-rules (1) and (2) of Rule 8 cannot be held as illegal or irregular.

6. The respondent further submitted that the appellants had full knowledge about the physical possession having been taken by the respondent bank and as a matter of fact, at the request of the appellants, the property was re-delivered to the appellants and they are in possession of the said property as a trustee. As such, the mere non-publication of the notice in the newspapers as contemplated under sub-rule (2) of Rule 8 would not militate the measures taken by the respondent in sub-rule (2) of Rule 8. In support of his submission the respondent also relied upon the case of Rosali v. T.A.I.C.O. Bank, II (2007) S.L.T. 69, wherein in was observed, "34. In Crawford on Statutory Construction at page 539 it is stated :

"271. Miscellaneous implied Exceptions from the Requirements of Mandatory Statutes, in General-Even where a statute is clearly mandatory or prohibitory yet, in many instances, the Courts will regard certain conduct beyond the prohibition of the statute through the use of various devices or principles. Most, if not all of these devices find their jurisdiction in considerations of justice. It is a well known fact that often to enforce the law to its letter produces manifest injustice, for frequently equitable and humane consideration and other considerations of a closely related nature, would seem to be of a sufficient calibre to excuse or justify a technical violation of the law.' Hence it is contended that the non-publication of the possession notice in the newspaper is only a technical flaw and that will not come in the way of the bank from proceeding further by taking any one of the measures as contemplated under Sec. 13 (4) of the Act."

7. But in the given case, the Act itself even in the words of the Hon'ble Supreme Court is very 'harsh'. Though the Act enables the secured creditor to realise the amount without undergoing the hazardous adjudicatory process, the rights of the borrower is also jealously guarded in several ways. Before proceeding with the matter, the secured creditor the bank/ financial institutions are expected to give a notice as contemplated under Sec. 13 (2) of the Act. The said notice should contain the details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. Sub-clause (3-A) of Sec. 13 (2) provides an opportunity to the borrower to make representation or raise any objection to the notice and, if any such thing is made, the secured creditor has to consider the representation or objection and the result of the same should be communicated within one week of receipt of such representation or objection and the reasons for acceptance/or non-acceptance of representation or objection to the borrower. If for any reason, the borrower does not give any reply or raise any objection, the secured creditor cannot proceed immediately and he has to wait for 60 days as contemplated under sub-clause (2) of Sec. 13 of the Act. This 60 days' time is given to the borrower to discharge his liabilities and, therefore, it is an enabling provision given to the borrower whereby the rights of the borrower is jealously guarded. Here also, there is no penal clause if further proceedings are taken within a period of 60 days. But however, it is mandatory that the secured creditor has to wait till the expiry of 60 days, then only he can take any one of the measures as contemplated under Sec. 13 (4) of the Act. But on the other hand, if any measure is taken under Sec. 13 (4) within 60 days from the date of issue of the notice under Sec. 13 (2), it would be a clear violation of the procedure, and entire proceedings taken would be vitiated. The reason behind granting 60 days' time is a breathing time to pay the debt due by him and if any action is initiated under Sec. 13 (4) before the expiry of 60 days, the prescribed limit of 60 days under Sec. 13 (2) to discharge the debt by the borrower would be a mockery. I approach the publication intended in sub-rule (2) of Rule 8 of the Rules, only in that line of the Security Interest (Enforcement) Rules, 2002. I derive support to say so, because the word 'shall' has been used in sub-rule (2). According to me when the word 'shall' has been used, there is no option on the part of the person except to follow the procedure without any breach. Instead of the word 'shall', the word 'may' has been used, the situation may be different as the word 'may' would include 'may not'. But when the word 'shall' has been used, I have to necessarily come to the conclusion that the publication as contemplated under sub-rule (2) has got to be complied with and the non-compliance of the same is not only a breach, but also the violation of the rules provided under the Security Interest (Enforcement) Rules, 2002. Hence, I hold that the non-publication in two leading newspapers as required under sub-rule (2) of Rule 8 would definitely vitiate the further measures taken under Sec. 13 (4) of the , and, therefore, the measures taken, one under Sec. 13 (4) has got to be held as irregular and liable to be set aside and accordingly it is set aside.

8. Though the appellants have raised several other grounds and as I am satisfied with this ground to dispose of the appeal, I am not inclined to advert to the other grounds raised in the appeal.

9. As the provisions in the are very stringent and harsh and that it excludes the adjudicatory process also, and enables the bank to proceed in taking possession of the property after issuing notice as contemplated under Sec. 13 (2) of the Act, which is almost in the nature of a demand, I feel that all the provisions in the Act and Rules should be followed in its letter and spirit without deviation. I am of the view that any deviation made, would definitely prejudice the case of the borrower, and would cause hardship as he is the aggrieved party. I also feel that these provisions are made only with a view to safeguard the rights of the borrower. Hence, they have got to be adhered to without any deviation and breach and hence, I come to the conclusion that the non-publication of the possession notice in the newspapers, out of which one must be in vernacular, is a serious breach, which vitiates the further proceedings taken under Sec. 13 (4) of the Act.

10. In the result, the appeal is allowed and the order passed by the D.R.T. is set aside.